Class 3 SOT license guide

What the SOT actually is

The National Firearms Act (NFA) regulates a specific set of items: machine guns, suppressors, short-barreled rifles and shotguns, “any other weapons,” and destructive devices. Businesses that import, manufacture or deal in those items pay an annual Special Occupational Tax to ATF.

Paying the SOT does not create a new license. It adds NFA privileges to an existing FFL. That is why you will hear people say they are an “01/SOT” or an “07/SOT.”

The three classes

The reduced rate for Classes 1 and 2 applies to businesses with gross receipts under $500,000 in the most recent tax year.

A Class 2 manufacturer can also deal in NFA items, so a Type 07 holder who pays the Class 2 tax does not need a separate Class 3.

How the tax year works

The SOT runs on a tax year from July 1 through June 30. The payment for the coming year is due by July 1.

When you first become liable partway through the year, the tax is prorated from the first day of the month you started to June 30. If your license arrives in March, your first payment covers March through June, and then the full amount is due again in July.

You file on ATF Form 5630.7 once your FFL has been issued, since the form needs your license number. ATF mails renewal forms before each tax year, but it is your responsibility to pay on time whether or not the form shows up.

What a Class 3 dealer can do

With an 01 and a Class 3 SOT, you can:

• Buy NFA items from manufacturers, importers and other SOT holders on a tax-exempt transfer (Form 3).
• Sell NFA items to individuals and trusts through the approved transfer process (Form 4).
• Sell to other SOT dealers tax-free on Form 3.
• Sell to government agencies on Form 5.
• Acquire post-1986 “dealer sample” machine guns for demonstration to law enforcement agencies, with a written request from an agency (commonly called a law letter).
• Hold transferable, pre-1986 machine guns in inventory and sell them to qualified individuals.

What you cannot do with a Class 3 is make NFA items. Threading a barrel for a suppressor is fine for a licensed gunsmith, but building a suppressor or cutting a rifle barrel under 16 inches for a customer is manufacturing an NFA item, which takes a Type 07 and Class 2.

Machine guns and the 1986 line

Since May 19, 1986, federal law has prohibited civilians from possessing machine guns made after that date. Only machine guns lawfully registered before then can be transferred to individuals. There is a small, fixed supply, and prices reflect it.

SOT holders can have access to newer machine guns only in limited ways:

• Class 3 dealers can acquire post-1986 samples only with a law letter from an agency interested in a demonstration.
• Class 2 manufacturers can make post-1986 machine guns as samples, for government sales, and for research and development.

In both cases the machine guns stay tied to the business and must be disposed of properly if the SOT or license lapses. Running an SOT mostly to own post-1986 machine guns personally is the kind of arrangement ATF looks for during inspections.

The 2026 change to NFA transfer tax

Starting January 1, 2026, federal law set the $200 making and transfer tax to zero for suppressors, short-barreled rifles, short-barreled shotguns and “any other weapons.” Machine guns and destructive devices still carry the $200 tax.

What did not change:

• These items are still regulated under the NFA.
• Transfers to individuals still require an approved Form 4, fingerprints, photos and a background check.
• The Special Occupational Tax for businesses is the same.

For dealers, the practical effect has been more customer interest in suppressors and short-barreled rifles. Lawsuits challenging the registration requirement for the zero-tax items were filed after the law passed. Keep an eye on how those resolve, because they may change the process again.

How a Form 4 transfer works

From a dealer’s side, a typical suppressor sale to an individual looks like this:

1. The item arrives in your inventory from a manufacturer or distributor on a Form 3.
2. The customer pays and chooses whether to register as an individual or through a trust or other entity.
3. You prepare Form 4 with the customer, usually through ATF’s eForms system. The customer submits fingerprints and a photo. For a trust, each responsible person in the trust submits Form 5320.23 with prints and a photo.
4. A copy goes to the CLEO where the transferee lives, as a notice.
5. ATF approves the transfer. Approval times for electronic Form 4s have dropped a great deal in recent years, but they vary.
6. The customer picks up the item after you receive the approval. Depending on the state, that may include a background check at pickup.

The customer cannot take possession before approval. Keep NFA items and their paperwork organized, because an inspector will reconcile both.

State law still controls

A Class 3 SOT means nothing if your state prohibits the item. Suppressors are legal to own in most states but banned in a handful, and short-barreled rifles and machine guns are more restricted still. Several states also restrict hunting with suppressors even where ownership is legal. Check your state’s law before stocking inventory.

Recordkeeping for SOT holders

SOT holders keep everything a regular licensee does, plus:

• NFA transfer approvals and related forms for every item acquired or disposed of;
• documentation for dealer samples, including the law letters;
• proof of SOT payment for each tax year.

ATF’s inspection of an SOT business checks your NFA inventory against the National Firearms Registration and Transfer Record. Serial numbers that don’t match the registry, or items that can’t be located, are the violations that matter most.

Is it worth it?

For a dealer who plans to sell suppressors or short-barreled rifles regularly, yes. The $500 tax is recovered quickly, and NFA customers tend to value a dealer who handles the paperwork well. For a transfer-only dealer with no NFA customers, it can wait. If you are planning both from the start, the FFL + SOT roadmap covers the timing and budget.